M A R K E T B E AT CZECH REPUBLIC Retail Q1 2020 ECONOMY: The Czech economy has a good starting position for difficult times YoY 12-Mo. Chg Forecast The COVID-19 pandemic hit the Czech Republic at the beginning of March, proving a slight delay as compared to the rest of Western Europe. For this reason, January and February still showed positive performance. Most government restrictive measures came in the €42,406 second half of March. In Q4 2019, the economy continued to slow down and grew at 2.0% y/y, while Q1 2020 is expected to grow at Average HH Income 1.0%, which is a positive outcome compared to the Eurozone average of 1.0% in Q4 2019 and Q1 2020 forecast -1.6%. The Czech government managed to stop and prevent further spreading of Covid-19 in a timely matter. The bill for this success will be issued in the coming quarters when in addition to hospitality, retail will be one of the most affected sectors. The Czech Republic has the advantage of €235.00 long-term low unemployment and the level of public debt, which gives space to mitigate the negative impact on the economy. Prime Rent, Sq m/month SUPPLY AND DEMAND: E-commerce benefits from increased interest in online shopping 4.50% Some of the upcoming retail projects are likely to be delayed because of the slowdown in construction. We will get more accurate figures Prime Yield in the coming quarters. At the beginning of the year, SC Opatovska (6,000 sq m) opened, which was created by the refurbishment of the Prime rent and yield for High Street units original building from the late 70s. This project foreshadows the trend of upgrading old local shopping centers, which are very appealing Source: Oxford Economics for investors as well as customers who make daily purchases mainly on the basis of accessibility. The only expected completely new shopping center for this year is the Borislavka Center, which should open in Prague in Q4. ECONOMIC INDICATORS Despite the obvious negative repercussions of the current crisis, there have been some positive effects. Grocery stores and their online Q1 2020 platforms are growing significantly. There is also an increased interest in retailers who use e-shops for sales, as a significant proportion of customers have moved to the Internet. At the end of Q1 2020, Czech e-commerce shows results that it compares to the second YoY 12-Mo. Christmas season. Chg Forecast 1.0% PRICING: Prime rents and prime yields remain stable, expected to fall due to the fall in tourism GDP* In Q1 2020, prime rent remained stable and recorded a year-on-year growth of 2.2%. In the coming years, there may be a decline, which will depend mainly on the length of restrictions on international tourism, which is heavily dependent on Prague's high street. In the long run, however, this will likely only be a fluctuation and the rents will return back to normal. Yields remain similarly stable for now. 3.0% Interest in the second half of the year will follow the opening of the CEE flagship store of Primark right on Prague's high street, which Unemployment Rate could attract the significant attention of domestic customers from the wider region. -0.7% PRIME RENT RETAIL SALES Y/Y GROWTH Private Consumption* 28% 24% Czech Republic 10.0% Eurozone 20% 5.8% 7.4% 4.8% 5.9% 5.0% 4.8% 16% 2.9% 2.6% 1.7% 2.5% 2.3% -2.2% 12% 1.2% 1.6% Retail Sales Volume 8% Index* 4% Y/Y % % Change Y/Y 0% -6.1% *Annual growth -8.2% Source: Oxford Economics, Czech Ministry of Labour and Social Affairs High-street Shopping centres 2014 2015 2016 2017 2018 2019 2020* 2021* M A R K E T B E AT CZECH REPUBLIC Retail Q1 2020 MARKET STATISTICS SHOPING CENTRE SHOPPING CENTRE DENSITY (STOCK PRIME RENT PRIME SUBMARKET PIPELINE POPULATION STOCK (SQ M)* PER 1,000 INH} (LOCAL CURRENCY) YIELD (SQ M) Prague 871,428 57,284 1,324,277 658 175.00 4.75% Moravia-Silesia 322,588 1,200,539 269 50.00 6.80% South Moravia 259,720 44,500 1,191,989 218 65.00 4.75% Ústí nad Labem 183,260 820,965 223 Liberec 165,428 443,690 373 Olomouc 151,627 23,300 632,015 240 Pilsen 120,193 589,899 204 Central Bohemia 113,096 1,385,141 82 Hradec Králové 101,036 551,647 183 South Bohemia 91,134 644,083 141 MARIE BALÁČOVÁ Zlín 76,985 582,555 132 Head of Research +420 234 603 740 /[email protected] Karlovy Vary 59,950 294,664 203 Pardubice 45,775 522,662 88 EVA LISOŇOVÁ Vysočina 27,764 509,813 54 Research Analyst +420 234 603 832 /[email protected] CZECH REPUBLIC TOTAL 2,589,984 125,084 10,693,939 242 Prague High street 235.00 4.50% cushmanwakefield.com Brno High street 70.00 6.25% Prague Retail parks 10.75 6.00% Brno Retail parks 9.25 6.75% A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION Cushman & Wakefield (NYSE: CWK) is a leading global real *SC stock including traditional centers and mixed-use schemes over 5.000 sq m retail GLA. estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of KEY SALES TRANSACTIONS Q1 2020 property, facilities and project management, leasing, capital markets, valuation and other services. PROPERTY SUBMARKET SELLER / BUYER SQ M OD Kotva Prague PSN / Generali Group 33,000 ©2020 Cushman & Wakefield. All rights reserved. The information Tesco Plzen Rokycanska Pilsen Tesco / Trigea 26,000 contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is Shopping Ivancice (RP) South Moravia Immofinanz / Portiva 5,000 presented without any warranty or representations as to its accuracy..